CORE MOLDING TECHNOLOGIES INC

Previous wording

Product sales fluctuate in response to several factors, including many that are beyond the Company’s control, such as general economic conditions, interest rates, government regulations, consumer spending, labor availability, and our customers’ production rates and inventory levels. Product sales consist of demand from customers in many different markets with different levels of cyclicality and seasonality. The Company's largest market, North American truck, which is highly cyclical, accounted for 52%, 45%, and 41% of the Company’s product revenue for the years ended December 31, 2023, 2022, and 2021, respectively.

Current wording

Product sales fluctuate in response to several factors, including many that are beyond the Company’s control, such as general economic conditions, interest rates, government regulations, consumer spending, labor availability, and our customers’ production rates and inventory levels. Product sales consist of demand from customers in many different markets with different levels of cyclicality and seasonality. The Company's largest market, North American truck, which is highly cyclical, accounted for 56%, 52%, and 45% of the Company’s product revenue for the years ended December 31, 2024, 2023, and 2022, respectively.

Previous wording

Beginning in the second half of 2024 and continuing through 2026, the Company’s business with Volvo will begin transitioning from existing programs that the Company currently supplies to new programs that the Company does not support. Notwithstanding this transition and the completion of existing programs with Volvo, the Company continues to actively bid for new Volvo business, which we believe we will continue to secure outside of the current programs. Going forward we remain focused on continuing to replace phased out business from existing programs with new programs from Volvo or other customers.

Current wording

During the second half of 2024 and continuing through 2026, the Company’s business with Volvo is transitioning from existing programs that the Company currently supplies to new programs that the Company does not support. Notwithstanding this transition and the completion of existing programs with Volvo, the Company continues to actively bid for new Volvo business, which we believe we will continue to secure outside of the current programs. Going forward we remain focused on continuing to replace phased out business from existing programs with new programs from Volvo or other customers.

Previous wording

The Company’s raw material supply chains remain stable, and the Company anticipates raw material pricing in 2024 to remain flat or slightly higher as compared to 2023. Labor markets have also stabilized, although at higher cost levels over the past several years. The Company does not anticipate challenges in hiring hourly labor, although management believes wage pressure will continue, especially in Mexico.

Current wording

The Company’s raw material supply chains remain stable, and the Company anticipates raw material pricing in 2025 to remain flat or slightly higher as compared to 2024; however, if tariffs are implemented in North America, the Company anticipates raw material cost to increase in 2025 as compared to 2024. Labor markets have also stabilized, although at higher cost levels over the past several years. The Company does not anticipate challenges in hiring hourly labor, although management believes wage pressure will continue, especially in Mexico.

Previous wording

Net sales for the years ended December 31, 2022 and 2021 totaled $377,376,000 and $307,483,000, respectively. Included in total sales were tooling project sales of $18,675,000 and $23,458,000 for the years ended December 31, 2022 and 2021, respectively. These sales are sporadic in nature and fluctuate in regard to scope and related revenue on a period-to-period basis. Product sales, excluding tooling project sales, for the year ended December 31, 2022 were $358,701,000 compared to $284,025,000 for the same period in 2021. The increase in sales is primarily the result of higher demand from the heavy-duty truck and power sports industries, price increases related to the recoupment of raw material inflation costs, and launch of new programs.

Current wording

Net sales for the years ended December 31, 2024 and 2023 totaled $302,378,000 and $357,738,000, respectively. Included in total sales were tooling project sales of $11,286,000 and $10,363,000 for the years ended December 31, 2024 and 2023, respectively. These sales are sporadic in nature and fluctuate in regard to scope and related revenue on a period-to-period basis. Product sales, excluding tooling project sales, for the year ended December 31, 2024 were $291,092,000 compared to $347,375,000 for the same period in 2023. The decrease in sales is primarily the result of lower demand from customers in all of the Company's significant markets.

Previous wording

Gross margin was approximately 13.9% of sales for the year ended December 31, 2022, compared with 13.4% for the year ended December 31, 2021. The gross margin percentage increase was due to net changes in selling price and raw material cost of 2.5% and higher fixed cost leverage of 0.8% offset by unfavorable product mix and production inefficiencies of 2.8%.

Current wording

Gross margin was approximately 17.6% of sales for the year ended December 31, 2024, compared with 18.0% for the year ended December 31, 2023. The gross margin percentage decrease was due to lower fixed cost leverage of 1.4% and unfavorable product mix and production inefficiencies of 1.3% offset by net changes in selling price and raw material cost of 2.3%.

Previous wording

The Company recorded net income for 2022 of $12,203,000 or $1.44 per basic and diluted share, compared with net income of $4,671,000 or $0.55 per basic and diluted share for 2021.

Current wording

The Company recorded net income for 2024 of $13,299,000 or $1.51 per diluted share, compared with net income of $20,324,000 or $2.31 per diluted share for 2023.

Previous wording

Comprehensive income totaled $14,181,000 in 2022, compared with comprehensive income of $4,371,000 in 2021. The increase was primarily related to an increase in net income of $7,532,000 and a net increase in post retirement benefit plan adjustments of $1,732,000.

Current wording

Comprehensive income totaled $10,290,000 in 2024, compared with comprehensive income of $22,572,000 in 2023. The decrease was primarily related to decreases in net income of $7,025,000, foreign currency hedges of $2,674,000, and post retirement benefit plan adjustments of $2,747,000.

Previous wording

Interest expense totaled $1,011,000 for the year ended December 31, 2023, compared to interest expense of $1,960,000 for the year ended December 31, 2022. The decrease in net interest expense was due to lower average senior debt balance for the year ended December 31, 2023, when compared to the same period in 2022. The Company also recognized $346,000 of interest income during the year ended December 31, 2023.

Current wording

Net interest expense totaled $1,011,000 for the year ended December 31, 2023, compared to interest expense of $1,960,000 for the year ended December 31, 2022. The decrease in net interest expense was due to lower average senior debt balance for the year ended December 31, 2023, when compared to the same period in 2022. The Company also recognized $346,000 of interest income during the year ended December 31, 2023.

Previous wording

The Company’s primary sources of funds have been cash generated from operating activities and borrowings from third parties. Primary cash requirements are for operating expenses, capital expenditures, repayments of debt, and acquisitions. The Company from time to time will enter into foreign exchange contracts and interest rate swaps to mitigate risk of foreign exchange and interest rate volatility. As of December 31, 2023, the Company had outstanding foreign exchange contracts and interest rate swaps with notional amounts totaling $9,195,000 and $23,229,000, respectively. At December 31, 2022, the Company had outstanding foreign exchange contracts and interest rate swaps with notional amounts totaling $13,851,000 and $24,479,000, respectively.

Current wording

The Company’s primary sources of funds have been cash generated from operating activities and borrowings from third parties. Primary cash requirements are for operating expenses, capital expenditures, repayments of debt, and acquisitions. The Company from time to time will enter into foreign exchange contracts and interest rate swaps to mitigate risk of foreign exchange and interest rate volatility. As of December 31, 2024, the Company had outstanding foreign exchange contracts and interest rate swaps with notional amounts totaling $29,668,000 and $21,719,000, respectively. At December 31, 2023, the Company had outstanding foreign exchange contracts and interest rate swaps with notional amounts totaling $9,195,000 and $23,229,000, respectively.

Previous wording

Cash provided by operating activities totaled $34,842,000 for the year ended December 31, 2023. Net income of $20,324,000 positively impacted operating cash flows. Non-cash deductions included in net income from depreciation and amortization, share based compensation, and deferred incomes taxes amounted to $12,912,000, $2,923,000 and $2,473,000 respectively, positively impacted cash flows. An increase in working capital of $3,812,000 resulted in a decrease in cash. The decrease in cash from working capital was primarily related to net changes in prepaid assets and accounts payable, offset by net changes in other accrued expenses, accounts receivable and inventory.

Current wording

Cash provided by operating activities totaled $35,151,000 for the year ended December 31, 2024. Net income of $13,299,000 positively impacted operating cash flows. Cash flows were positively impact by non-cash deductions in net income from depreciation and amortization, share based compensation and deferred income taxes of $13,399,000, $2,495,000 and $473,000, respectively. A decrease in working capital of $4,064,000 resulted in an increase in cash. The increase in cash from working capital was primarily related to net changes in accounts receivable, inventory and other prepaid assets, offset by net changes in accounts payable and other accrued liabilities.

Previous wording

Cash used in investing activities totaled $9,100,000 for the year ended December 31, 2023, primarily related to purchases of property, plant and equipment for additional capacity, automation, new programs and equipment improvements at the Company’s production facilities. The Company anticipates spending approximately $13,000,000 on property, plant and equipment purchases for all of the Company's operations for the year ended December 31, 2024. The Company plans on using cash on hand and cash from operations to finance capital expenditures. At December 31, 2023, purchase commitments for capital expenditures in progress were approximately $1,100,000.

Current wording

Cash used in investing activities totaled $11,525,000 for the year ended December 31, 2024, related to purchases of property, plant and equipment for additional capacity, automation, new programs and equipment improvements at the Company’s production facilities. The Company anticipates spending approximately $10,000,000 to $12,000,000 on property, plant and equipment purchases for all of the Company's operations for the year ended December 31, 2025. The Company plans on using cash on hand and cash from operations to finance capital expenditures. At December 31, 2024, purchase commitments for capital expenditures in progress were approximately $2,802,000.

Previous wording

Cash used in financing activities totaled $5,821,000 for the year ended December 31, 2023. Cash activity primarily consisted of the purchase of treasury stock of $2,669,000 in exchange for payment of taxes related to net share settlements of equity awards, net repayments of revolving loans of $1,864,000 and repayments of principal on outstanding term loans of $1,288,000.

Current wording

Cash used in financing activities totaled $5,927,000 for the year ended December 31, 2024. Cash activity primarily consisted of the purchase of treasury stock related to the Company's stock buy back plan of $2,939,000, purchase of treasury stock of $1,440,000 in exchange for payment of taxes related to net share settlements of equity awards and repayments of long-term debt of $1,548,000.

Previous wording

At December 31, 2023, the Company had $24,104,000 of cash on hand, an available revolving line of credit of $25,000,000 and capex line of credit of $25,000,000. If a material adverse change in the financial position of the Company should occur, or if actual sales or expenses are substantially different than what has been forecasted, the Company's liquidity and ability to obtain further financing to fund future operating and capital requirements could be negatively impacted.

Current wording

At December 31, 2024, the Company had $41,803,000 of cash on hand, an available revolving line of credit of $25,000,000 and capex line of credit of $25,000,000. If a material adverse change in the financial position of the Company should occur, or if actual sales or expenses are substantially different than what has been forecasted, the Company's liquidity and ability to obtain further financing to fund future operating and capital requirements could be negatively impacted.

Previous wording

On July 22, 2022, the Company entered into a credit agreement (the “Huntington Credit Agreement”) with The Huntington National Bank (“Huntington”), as the sole lender, administrative agent, lead arranger and book runner, and the lenders from time to time thereto. Pursuant to the terms of the Huntington Credit Agreement, Huntington made available to the Company secured loans (the “Huntington Loans”) in the maximum aggregate principal amount of $75,000,000 ($38,689,000 of which was advanced to the Company on July 22, 2022), comprised of three $25,000,000 commitments: a term loan commitment, a CapEx loan commitment, and a revolving loan commitment.

Current wording

On July 22, 2022, the Company entered into a credit agreement and on March 7, 2024, entered into the First Amendment to the credit agreement (as amended, the “Huntington Credit Agreement”) with The Huntington National Bank (“Huntington”), as the sole lender, administrative agent, lead arranger and book runner, and the lenders from time to time thereto. Pursuant to the terms of the Huntington Credit Agreement, Huntington made available to the Company secured loans (the “Huntington Loans”) in the maximum aggregate principal amount of $75,000,000 ($38,689,000 of which was advanced to the Company on July 22, 2022), comprised of three $25,000,000 commitments: a term loan commitment, a CapEx loan commitment, and a revolving loan commitment.

Previous wording

SOFR Loans bear interest at a per annum rate equal to Daily Simple SOFR plus a margin of 180 to 230 basis points determined based on the Company’s leverage ratio. Daily Simple SOFR means, for any day (a “SOFR Rate Day”), a rate per annum equal to the greater of (a) SOFR for the day (such day, the “SOFR Determination Date”) that is five (5) U.S. Government Securities Business Days prior to (i) if such SOFR Rate Day is a U.S. Government Securities Business Day, such SOFR Rate Day or (ii) if such SOFR Rate Day is not a U.S. Government Securities Business Day, the U.S. Government Securities Business Day immediately preceding such SOFR Rate Day, in each case, as such SOFR is published by the SOFR Administrator on the SOFR Administrator’s Website, and (b) 0.00%.

Current wording

Government Securities Business Days prior to (i) if such SOFR Rate Day is a U.S. Government Securities Business Day, such SOFR Rate Day or (ii) if such SOFR Rate Day is not a U.S. Government Securities Business Day, the U.S. Government Securities Business Day immediately preceding such SOFR Rate Day, in each case, as such SOFR is published by the SOFR Administrator on the SOFR Administrator’s Website, and (b) 0.00%.

Previous wording

In connection with the credit agreement, the Company incurred debt origination fees of $402,000 related to the Huntington Credit Agreement, which is being amortized over the life of the Credit Agreement. The aggregate unamortized deferred financing fees as of December 31, 2023 totaled $291,000.

Current wording

In connection with the credit agreement, the Company incurred debt origination fees of $402,000 related to the Huntington Credit Agreement, which is being amortized over the life of the Credit Agreement. The aggregate unamortized deferred financing fees as of December 31, 2024 totaled $210,000.

Previous wording

Pursuant to the terms of the Huntington Credit Agreement, Huntington made available to the Company a revolving loan commitment (the “Huntington Revolving Loan”) of $25,000,000 ($13,689,000 of which was advanced to the Company on July 22, 2022). The Company has $25,000,000 of available revolving loans of which none is outstanding as of December 31, 2023. The interest rate for the Huntington Revolving Loan was 7.11% as of December 31, 2023.

Current wording

Pursuant to the terms of the Huntington Credit Agreement, Huntington made available to the Company a revolving loan commitment (the “Huntington Revolving Loan”) of $25,000,000 ($13,689,000 of which was advanced to the Company on July 22, 2022). The Company has $25,000,000 of available revolving loans of which none is outstanding as of December 31, 2024. The interest rate for the Huntington Revolving Loan was 6.33% as of December 31, 2024.

Previous wording

Pursuant to the terms of the Huntington Credit Agreement, Huntington made available to the Company a Term Loan commitment (the “Huntington Term Loan”) of $25,000,000 ($25,000,000 of which was advanced to the Company on July 22, 2022). The Huntington Term Loan is to be repaid in monthly installments beginning August 2022 of $104,000 per month for the first 24 months, $156,000 per month for the next 24 months, $208,000 for the next 12 months and the remaining balance to be paid on July 22, 2027. The interest rate for the Huntington Term Loan was 7.11% as of December 31, 2023.

Current wording

Pursuant to the terms of the Huntington Credit Agreement, Huntington made available to the Company a Term Loan commitment (the “Huntington Term Loan”) of $25,000,000 ($25,000,000 of which was advanced to the Company on July 22, 2022). The Huntington Term Loan is to be repaid in monthly installments beginning August 2022 of $104,000 per month for the first 24 months, $156,000 per month for the next 24 months, $208,000 for the next 12 months and the remaining balance to be paid on July 22, 2027. The interest rate for the Huntington Term Loan was 6.11% as of December 31, 2024.

Previous wording

The Company entered into an interest rate swap agreement that became effective July 22, 2022 and continues through July 2027, which was designed as a cash flow hedge for an initial aggregate amount of $25,000,000 of the Huntington Term Loan. Under this agreement, the Company will pay a fixed SOFR rate of 2.95% to the swap counterparty in exchange for the Term Loans daily variable SOFR. The fair value of the interest rate swap was an asset of $524,000 at December 31, 2023.

Current wording

The Company entered into an interest rate swap agreement that became effective July 22, 2022 and continues through July 2027, which was designed as a cash flow hedge for an initial aggregate amount of $25,000,000 of the Huntington Term Loan. Under this agreement, the Company will pay a fixed SOFR rate of 2.95% to the swap counterparty in exchange for the Term Loans daily variable SOFR. The fair value of the interest rate swap was an asset of $491,000 at December 31, 2024.

Previous wording

On December 22, 2023 the Company filed a universal shelf Registration Statement on Form S-3 (the “Registration Statement”) with the SEC in accordance with the Securities Act of 1933, as amended, which became effective on January 8, 2024. The Registration Statement replaces an existing shelf Registration Statement which expired on December 16, 2023. The Registration Statement registered common stock, preferred stock, debt securities, warrants, depositary shares, rights, units, and any combination of the foregoing, for a maximum aggregate offering price of up to $50 million, which may be sold from time to time. The terms of any securities offered under the Registration Statement and intended use of proceeds will be established at the times of the offerings and will be described in prospectus supplements filed with the SEC at the times of the offerings. The Registration Statement has a three-year term.

Current wording

The Registration Statement registered common stock, preferred stock, debt securities, warrants, depositary shares, rights, units, and any combination of the foregoing, for a maximum aggregate offering price of up to $50 million, which may be sold from time to time. The terms of any securities offered under the Registration Statement and intended use of proceeds will be established at the times of the offerings and will be described in prospectus supplements filed with the SEC at the times of the offerings. The Registration Statement has a three-year term.

Previous wording

Management maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. The Company determined that no allowance for doubtful accounts was needed at December 31, 2023 or December 31, 2022, respectively. Management also records estimates for customer returns and deductions, discounts offered to customers, and for price adjustments. Should customer returns and deductions, discounts, and price adjustments fluctuate from the estimated amounts, additional allowances may be required. The Company had an allowance for estimated chargebacks of $138,000 at December 31, 2023 and $502,000 at December 31, 2022.

Current wording

Management maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. The Company determined that no allowance for doubtful accounts was needed at December 31, 2024 or December 31, 2023, respectively. Management also records estimates for customer returns and deductions, discounts offered to customers, and for price adjustments. Should customer returns and deductions, discounts, and price adjustments fluctuate from the estimated amounts, additional allowances may be required. The Company had an allowance for estimated chargebacks of $227,000 at December 31, 2024 and $138,000 at December 31, 2023.

Previous wording

Inventories, which include material, labor and manufacturing overhead, are valued at the lower of cost or net realizable value. The inventories are accounted for using the first-in, first-out (FIFO) method of determining inventory costs. Inventory quantities on-hand are regularly reviewed, and where necessary, provisions for excess and obsolete inventory are recorded based on historical and anticipated usage. The Company has recorded an allowance for slow moving and obsolete inventory of $671,000 at December 31, 2023 and $433,000 at December 31, 2022.

Current wording

Inventories, which include material, labor and manufacturing overhead, are valued at the lower of cost or net realizable value. The inventories are accounted for using the first-in, first-out (FIFO) method of determining inventory costs. Inventory quantities on-hand are regularly reviewed, and where necessary, provisions for excess and obsolete inventory are recorded based on historical and anticipated usage. The Company has recorded an allowance for slow moving and obsolete inventory of $1,392,000 at December 31, 2024 and $671,000 at December 31, 2023.

Previous wording

Company. Such events and circumstances could include changes in economic conditions, industry and market conditions, cost factors, overall financial performance, reporting unit specific events and capital markets pricing. The Company places more weight on the events and circumstances that most affect the Company's fair value or carrying amount. These factors are all considered by management in reaching its conclusion about whether to perform step one of the impairment test. If the Company elects to bypass the qualitative assessment for the reporting unit, or if a qualitative assessment indicates it is more-likely-than-not that the estimated carrying value of the reporting unit exceeds its fair value, the Company proceeds to a quantitative approach.

Current wording

Under a qualitative and quantitative approach, the impairment test for goodwill consists of an assessment of whether it is more-likely-than-not that the reporting unit’s fair value is less than its carrying amount. As part of the qualitative assessment, the Company considers relevant events and circumstances that affect the fair value or carrying amount of the Company. Such events and circumstances could include changes in economic conditions, industry and market conditions, cost factors, overall financial performance, reporting unit specific events and capital markets pricing. The Company places more weight on the events and circumstances that most affect the Company's fair value or carrying amount. These factors are all considered by management in reaching its conclusion about whether to perform step one of the impairment test. If the Company elects to bypass the qualitative assessment for the reporting unit, or if a qualitative assessment indicates it is more-likely-than-not that the estimated carrying value of the reporting unit exceeds its fair value, the Company proceeds to a quantitative approach.

Previous wording

The Company performed a qualitative analysis for the years end December 31, 2023, 2022 and 2021, and determined there was no impairment of the Company’s goodwill.

Current wording

The Company performed its annual impairment test for the years end December 31, 2024 and 2023, and determined there was no impairment of the Company’s goodwill.

Previous wording

The Company is self-insured with respect to Columbus, Ohio; Gaffney, South Carolina; Winona, Minnesota; and Brownsville, Texas for medical, dental and vision claims and Columbus, Ohio for workers’ compensation claims, all of which are subject to stop-loss insurance thresholds. The Company is also self-insured for dental and vision with respect to its Cobourg, Canada location. The Company has recorded an estimated liability for self-insured medical, dental and vision claims incurred but not reported and worker’s compensation claims incurred but not reported at December 31, 2023 and December 31, 2022 of $988,000 and $889,000, respectively, included within the Other Current Liabilities on the Company's Consolidated Balance Sheets.

Current wording

The Company is self-insured with respect to Columbus, Ohio; Gaffney, South Carolina; Winona, Minnesota; and Brownsville, Texas for medical, dental and vision claims and Columbus, Ohio for workers’ compensation claims, all of which are subject to stop-loss insurance thresholds. The Company is also self-insured for dental and vision with respect to its Cobourg, Canada location. The Company has recorded an estimated liability for self-insured medical, dental and vision claims incurred but not reported and worker’s compensation claims incurred but not reported at December 31, 2024 and December 31, 2023 of $1,087,000 and $988,000, respectively, included within the Other Current Liabilities on the Company's Consolidated Balance Sheets.

Previous wording

Management records an accrual for post retirement costs associated with the health care plan sponsored by the Company for certain retirees. Should actual results differ from the assumptions used to determine the reserves, additional provisions may be required. In particular, increases in future healthcare costs above the assumptions could have an adverse effect on the Company's operations. The effect of a change in healthcare costs is described in Note 12 - Post Retirement Benefits. Core Molding Technologies had a liability for post retirement healthcare benefits based on actuarially computed estimates of $3,116,000 at December 31, 2023 and $6,625,000 at December 31, 2022.

Current wording

Management records an accrual for post-retirement costs associated with the health care plan sponsored by the Company for certain retirees. Should actual results differ from the assumptions used to determine the reserves, additional provisions may be required. In particular, increases in future healthcare costs above the assumptions could have an adverse effect on the Company's operations. The effect of a change in healthcare costs is described in Note 14 - Post Retirement Benefits. The Company had a liability for post-retirement healthcare benefits based on actuarial computed estimates of $3,298,000 at December 31, 2024 and $3,116,000 at December 31, 2023.

Previous wording

As of December 31, 2023 the Company had a net deferred tax asset of $370,000 consisting of net deferred tax asset of $1,595,000 related to tax positions in Mexico, offset by deferred tax liabilities of $1,182,000 and $43,000 related to tax positions in the United States and Canada. As of December 31, 2023, the Company had a valuation allowance of $1,530,000 against the deferred tax asset related to local tax positions in the United States, due to cumulative losses over the last three years and uncertainty related to the Company’s ability to realize the deferred assets. The Company believes that the deferred tax assets associated with the Mexican tax jurisdictions are more-likely-than-not to be realizable based on estimates of future taxable income.

Current wording

As of December 31, 2024 the Company had a net deferred tax asset of $1,454,000 and $183,000 related to tax positions in Mexico and Canada and deferred tax liabilities of $1,219,000 related to tax positions in the United States. Deferred tax assets are included in "Other non-current assets" on the Consolidated Balance Sheets and deferred tax liabilities are included in "Other non-current liabilities" on the Consolidated Balance Sheets. As of December 31, 2024, the Company had a valuation allowance of $1,265,000 against the deferred tax asset related to local tax positions in the United States, due to cumulative losses over the last three years and uncertainty related to the Company’s ability to realize the deferred assets. The Company believes that the deferred tax assets associated with the Mexican and Canadian tax jurisdictions are more-likely-than-not to be realizable based on estimates of future taxable income.